Equity Clock

Stock Market Outlook for July 29, 2020

Margin debt is flashing a signal that we haven’t seen since May of 2007, just ahead of the generation peak in the equity market.

 

 

 

*** Stocks highlighted are for information purposes only and should not be considered as advice to purchase or to sell mentioned securities.   As always, the use of technical and fundamental analysis is encouraged in order to fine tune entry and exit points to average seasonal trends.

Stocks Entering Period of Seasonal Strength Today:

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TransGlobe Energy Corp. (TSE:TGL.TO) Seasonal Chart

Donegal Group, Inc. (NASD:DGICA) Seasonal Chart

Air Lease Corp. (NYSE:AL) Seasonal Chart

PennyMac Financial Services, Inc. (NYSE:PFSI) Seasonal Chart

Acceleron Pharma Inc. (NASD:XLRN) Seasonal Chart

Invesco Canadian Dividend Index ETF (TSE:PDC.TO) Seasonal Chart

BMO Floating Rate High Yield ETF (TSE:ZFH.TO) Seasonal Chart

WisdomTree Total Earnings Fund (NYSE:EXT) Seasonal Chart

 

 

The Markets

Stocks closed lower on Tuesday as investors monitor the ongoing debate between Republicans and Democrats on the passage of a new stimulus bill to provide pandemic relief.  The S&P 500 Index shed around two-thirds of one percent, moving back towards its rising 20-day moving average around 3200.  Momentum indicators continue to roll over following sell signals triggered in the previous session.  Both MACD and RSI have been negatively diverging from price over the past month and a half, suggesting waning buying demand as the benchmark charted new recovery highs.  A change in trajectory is beginning to be implied.  A similar setup was observed back in February when the benchmark seemed to shake off coronavirus concerns and charted new all-time highs, but momentum indicators were already on a trend of lower-lows and lower-highs.  Support is implied by major moving averages below, a break of which would send shockwaves through the market.  Subscribers following the model portfolio are well setup for this potential shift in trajectory.  Not subscribed yet?  Signup here: https://charts.equityclock.com/subscribe

On the economic front, a report on home prices in the US was released before Tuesday’s opening bell.  The headline print indicated that home prices in the nation’s 20-largest cities were unchanged (0.0%) in May, missing the consensus analyst estimate that called for a rise of 0.5%.  Stripping out the seasonal adjustments, home prices actually increased by 0.4% in this spring month, which is weaker than the 1.0% increase that is average for the fifth month of the year.  The year-to-date change is now higher by 2.8% through the end of May, stronger than the 2.0% increase that is average for this timeframe.  For the most part, the trend in prices continues to be above average across the regions, including Atlanta, Charlotte, Chicago, Cleveland, Denver, Las Vegas, Minneapolis, Phoenix, San Diego, Seattle, and Tampa.  The drags on the headline print were below average results in Boston, Dallas, Los Angeles, Miami, New York, San Francisco, and Washington.  The areas of weakness are large and dense metropolitan areas that have been been vulnerable to the spread of the virus.  This may be the first evidence of waning demand for homes in these large cities as Americans consider moving towards less populous areas of the country, perhaps with more space.  This is a trend that warrants monitoring through the months/years ahead.  Subscribers can login to the database to view the seasonal charts for this report at https://charts.equityclock.com/sp-corelogic-case-shiller-home-price-index-city-breakdown

Sentiment on Tuesday, as gauged by the put-call ratio, ended bullish at 0.83.  Earlier in the session, the ratio hit a low of 0.51 after the opening bell before showing an abrupt uptick intraday.  Complacency in this sentiment gauge continues to be implied, but the jump from around 0.6 to 0.8 over the course of a mere half hour when the market was fairly stable is extremely peculiar.  It suggests that one investor (or group of investors) took a large stab at at a negative bet (via puts), perhaps in anticipation of the events ahead, including the FOMC meeting announcement on Wednesday and major tech earnings on Thursday.  The event risk is high and it appears that someone bought protection.

 

 

 

 

Seasonal charts of companies reporting earnings today:

 

 

S&P 500 Index

 

 

TSE Composite

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